Per Jansson: Interest rates have peaked

Since the Riksbank's monetary policy meeting in November, inflation has continued to fall, at the same time as the Swedish economy has slowed down roughly in the way the Riksbank had forecast. “Inflation is continuing to look good, and recent outcomes in Sweden and abroad reinforce my opinion that inflationary pressures are really on the way down. This is very pleasing and important, so that Swedish citizens can regain their purchasing power,” said Mr Jansson.

Despite the brighter outlook, there are still some questions about the inflation dynamic going forward. He pointed out, for instance, that companies changed their pricing behaviour during the period of high inflation. “During this period, many companies have transferred cost increases to consumer prices to a greater extent than before. It is important that this type of ‘opportunist’ behaviour does not continue, if new cost shocks were to arise,” reasoned Mr Jansson.

All in all, the krona has appreciated since the monetary policy meeting in November. This reduces the risk of inflation becoming entrenched at a level that is too high. “But exchange rates can fluctuate rapidly and we need to be constantly aware that rapid and often difficult to understand exchange rate movements can occur, and they can in turn affect inflation prospects,” he continued.

The Executive Board of the Riksbank will hold its next monetary policy meeting on 31 January, when it will update its assessments of which monetary policy is appropriate for inflation to be in line with the inflation target going forward.
“I said at the November meeting that it is clear that inflationary pressures are now really slowing down. I think the recent developments confirm this picture. This also reinforces my earlier observation that interest rates appear to have peaked. But the future is always uncertain. The situation in Sweden and abroad is difficult to assess and we need to be prepared for inflation to be both higher or lower than in our forecast and to adjust monetary policy accordingly,” concluded Mr Jansson.